California Affordable Housing Legislation Update
This year, the California legislature sent a number of affordable housing bills to Governor Gavin Newsom for signature. In September, Governor Newsom signed some of those bills and vetoed others. This outline summarizes the most important affordable housing bills sent to the Governor’s desk this term.
1. AB 846 (Calculation of Affordable Rents; Annual Rent Increase Caps for Low-Income Housing Tax Credit Projects – Enacted)
AB 846 simplifies and improves the calculation of affordable rent levels for certain affordable-restricted rental projects in California. AB 846 addresses the so-called “HCD rent” vs. “CTCAC rent” discrepancy for any project (i) in which at least 80% of the residential units are restricted as affordable, and (ii) which receives low-income housing tax credits, tax-exempt bonds, or other local, state or federal grants or loans on or after January 1, 2025.
Prior to enactment of AB 846, an affordable project regulated by more than one affordable regulatory agreement often would be subject to competing, inconsistent affordable rent restrictions, with one or more regulatory agreements imposing so-called “HCD rents” and one or more regulatory agreements imposing so-called “CTCAC rents.” In many counties in California, HCD rents and CTCAC rents are not the same. So-called “HCD rents” are affordable rents calculated under the requirements of California Health and Safety Code Section 50053, using area median income numbers published by the California Department of Housing and Community Development (“HCD”). So-called CTCAC rents are affordable rents calculated by the California Tax Credit Allocation Committee (“CTCAC”) under the requirements of the federal low-income housing tax credit program.
AB 846 amends California Health and Safety Code Section 50053 to provide that, in most instances, the applicable income and rent limits for qualifying affordable projects will be controlled by the CTCAC rent calculation. For example, a 100% affordable-restricted rental project that has both a 2025 CTCAC low-income housing tax credit allocation and a density bonus can charge CTCAC rents on all of the units in the project, rather than having to charge HCD rents on the density bonus units and CTCAC rents on the balance of the units.
AB 846 also requires CTCAC to adopt regulations limiting annual rent increases for tenants in existing and new low-income housing tax credit projects.
2. AB 2926 (Tightening California’s Preservation Notice Law – Enacted)
AB 2926 tightens California’s “preservation notice law” for housing projects with expiring affordable housing restrictions. Prior to enactment of AB 2926, California Government Code Section 65863.11 required an owner of a subsidized affordable housing project with expiring affordable restrictions to send a notice of right of first offer to a list of qualified affordable housing preservationists, and either (i) accept an offer to acquire the property submitted by any of those preservationists; or (ii) reject that offer, in which case the owner could not freely sell the property for five years after expiration of affordable housing restrictions. AB 2926 amends the law to provide that the owner of the expiring project must either (a) accept an offer to acquire the property submitted by any of those preservationists; or (b) reject that offer, in which case the owner must extend the property’s expiring affordable housing restrictions for an additional thirty years.
AB 2926 also enacts other notable changes to California’s preservation notice law, including (i) updating the list of affordable housing programs covered by the law, and (ii) shrinking the exemption from the preservation notice law’s annual compliance reporting requirement for partially-affordable projects. Before AB 2926, affordable projects in which less than 25% of the rental units are affordable-restricted were not subject to compliance certification requirements; AB 2926 decreases that 25% threshold to 5%.
3. AB 3160; AB 3190 (State Low Income Housing Tax Credits; Prevailing Wage– Not Enacted).
AB 3160 and AB 3190 were not enacted this term. AB 3160 would have set aside $500,000,000 in CA state low-income housing tax credits each year from 2026 through 2030, and AB 3190 would have imposed CA prevailing wage on all affordable projects financed with CA state low-income housing tax credits awarded from 2026 through 2030. The two bills were tied together, meaning that both needed to be signed by the Governor in order to become law. The Governor signed AB 3190 but vetoed AB 3160; thus neither bill became legally effective.
Please contact Chris Dubois, Ofer Elitzur, Steve Ryan, Chris Stark or Lisa Weil should you have any questions.